Why did the World Bank provide a loan to Kazakhstan for livestock sector development?
At the request of the Government of the Republic of Kazakhstan, the World Bank Group, jointly with the Ministry of Agriculture, has prepared the Kazakhstan Sustainable Livestock Development Program for Results, to be implemented in 2021–25.
The Program responds to a number of high-level priorities as outlined by President Tokaev in his State of the Nation Address of September 2, 2019. First, it aims to contribute to the diversification of Kazakhstan’s exports away from minerals and oil. Second, it intends to boost small and medium business growth and create opportunities for socioeconomic development in rural areas. And third, it seeks to increase agricultural productivity, foster environmentally friendly production, and improve the use of Kazakhstan’s vast pasture and grassland resource potential.
What are the objectives of the Sustainable Livestock Development Program for Results?
The Program Development Objective (PDO) is to support the development of environmentally sustainable, inclusive, and competitive beef production in Kazakhstan.
The PDO-Level Results Indicators are:
a. Share of public expenditure in support of beef cattle production and processing that addresses green growth and sustainability in the beef sector (sustainable). This will measure the sustainable dimension of the PDO and monitor shifts in public expenditures that are due to the proposed interventions and lead to a scaling-up of good practices and improved agri-environmental outcomes in state support policies. This indicator has been introduced as the value-added element, because it ensures that the Program has due attention to climate sustainability as it supports increased beef production.
b. Number of small and medium farmers selling to feedlots (inclusive). This will be measured as an increase in the number of small and medium farmers who have taken part in the farmer-centric programs and have sold at least 10 calves per year to feedlots within the past two years. This indicator measures the inclusiveness dimension of the PDO and monitors the improved linkage of small and medium farmers to markets. This indicator contributes to the high-level and long-term aim of improving jobs and other income opportunities in rural areas.
c. Value of beef exports (competitive). This will be measured as the annual value of beef exported through slaughterhouses and processing enterprises. Almost all exported beef from these facilities originates from feedlots (farmers will be linked to feedlots), and therefore this indicator is attributable to the Program and can measure the impact of Program interventions. The indicator measures the competitive dimension of the PDO and monitors and measures increases in the quantity and quality of exports. It also contributes to the high-level and long-term objective of diversifying exports away from oil.
What instruments will the World Bank use to support the Program?
The five-year (2021–25) implementation of the Sustainable Livestock Development Program for Results will be financed through a US$500 million loan that will be disbursed upon the achievement of agreed, concrete, and measurable results. Achievement of each result will be reached through a set of specific, identified activities designed to ensure that the Program is implemented according to the best available international practices. There are three defined results areas (see next question) that are linked to specific actions and measurable indicators.
What is the focus of the Program?
The Sustainable Livestock Development Program for Results is designed to address important public policy issues that will boost the competitiveness, inclusiveness, and environmental sustainability of the livestock sector in Kazakhstan.
Competitiveness refers to the government services and enabling environmental policies that will help boost the competitiveness of the livestock sector. Specifically, the Program aims to improve veterinary and animal health service provision for small and medium farmers. Kazakhstan has been successful in improving its public veterinary services, as demonstrated by the evaluation of the International Organization of Animal Health (OIE). However, further improvements are required to ensure that small and medium livestock farmers in particular can access quality veterinary care and services to enhance the productivity of their livestock. In addition, further improvements are necessary to bring Kazakhstan’s animal traceability systems in line with international best practices.
Inclusiveness refers to the government objective of promoting small and medium entrepreneurship and socioeconomic development in rural areas. The Program will adopt the farmer-centric model, whereby linkages with high-value, export-oriented meat value chains will be promoted for small and medium farmers. Not all farmers may qualify, but those who do can improve their agricultural practices, adopt better farm management techniques and grazing practices, and improve the quality of their livestock, benefiting by being part of export-focused meat value chains. The Program aims to support 20,000 new, modern small and medium farmers and promote good agricultural practices in at least 100,000 small and medium farms.
Environmental sustainability is important for the development of modern, export-oriented meat value chains because today’s consumers, in both developed and emerging markets, demand products that are produced with a low impact on climate change and the environment. Beef production is generally associated with a high level of greenhouse gas emissions, land degradation, and other negative effects, so it is particularly important that the Program address these concerns. Countries that have supported climate-smart systems for their livestock sectors have been able to gain access to niche and high-value markets globally (e.g., Uruguay). This focus is also in line with Kazakhstan’s Nationally Determined Contribution (NDC) to the Paris Agreement, setting an economy-wide target of a 15–25 percent reduction in greenhouse gas emissions by 2030 compared to 1990. The Program will address environmental sustainability by promoting better environmental outcomes from the state’s support measures (subsidies) and by instituting monitoring mechanisms for greenhouse gas emissions.
What international experience did the Bank consider in preparing the Program?
The World Bank has been supporting livestock sector development programs in many countries, including in the Kyrgyz Republic, Uzbekistan, and Tajikistan in the Europe and Central Asia region. The Bank also has substantial experience in export-oriented livestock systems in a variety of countries, for example, Uruguay and Mexico. Most recently, the Bank has supported livestock investments in Mongolia, Ethiopia, Colombia, Vietnam, and China. A key lesson from all of these programs is that interventions need to include sustainable pasture management, good animal husbandry practices, strengthened veterinary systems, and improved traceability and food safety. These programs also pay special attention to ensure that livestock sector growth does not negatively affect the environment and increase greenhouse gas emissions.
How will the World Bank ensure that the Program does not carry corruption risks?
The Program has been designed to minimize corruption risks in the following ways. First, during Program preparation, the World Bank conducted a detailed assessment of the financial management systems of all agencies that are directly linked to implementation and introduced specific measures to reduce the risk of corruption and fraud. That assessment can be found here. Second, during Program implementation, the Bank will disburse funds only when there is confirmation that the corresponding result has been achieved. To this end, the World Bank and the Government will establish a system of independent verification of the results of the Program.
In 2004, the World Bank produced its first analytical report on Kazakhstan’s livestock sector. Has anything changed since then?
In 2004, the Bank prepared a report on Kazakhstan’s livestock sector that highlighted some critical issues for the sector’s development. Much has changed since then. Today, we can see that Kazakhstan has significantly improved its veterinary systems: the animal health situation in Kazakhstan is much better than it was 15 years ago, much better, in fact, than in the rest of the Central Asia region. Kazakhstan has attracted considerable private investment in the livestock sector and advanced in breed improvements for cattle and sheep. However, for the sector to be competitive, a number of challenges must be addressed. These include the need for improvements in feed production and storage; more sustainable systems of high-quality cattle and sheep production; and supply chain advancements, such as the inclusion of small and medium farmers in the export-oriented value chains, income generation and job creation, the scaling-up of agricultural advisory programs, and farmer education. Today we also see that Kazakhstan is proactively seeking new markets and export opportunities and working with export partners to open markets for sustainable livestock products. These are difficult challenges, but many initiatives are geared toward addressing them. The Program is supporting these initiatives and provides a vehicle for measuring progress and bringing in best practices.
How will the World Bank conduct monitoring and verification of the results of the Program?
Monitoring and verification of the results is at the core of a Program for Results such as the one discussed here. The Program includes well-defined, concrete, measurable, and realistic results targets, all of which are linked to the disbursement of a portion of the loan. Each target must be independently verified, and the World Bank must receive an assurance that the target has been achieved. Only after verification will the Bank disburse that portion of the loan. For example, we have a target of creating 20,000 small and medium farms that is linked to the disbursement of US$100 million. How do we measure this target? First, we define small and medium farms. These are registered individual or family farmers with 10–500 head of cattle that supply cattle to feedlots. They have to be registered, they have to have access to the government programs, and they have to meet certain criteria for adopting good agricultural practices. Once all of the criteria are met, we will consider them created, and once the target has been achieved, the corresponding funds are disbursed to the Ministry of Finance who is the Government’s signing party to the Program.
Who are the beneficiaries of the Program?
The beneficiaries are registered individual farmers with holding sizes between 10 and 500 head of cattle. At least 100,000 household and small and medium individual farmers will benefit from improved agricultural advisory and knowledge transfer services through the interventions supported by the Program. At least 20,000 new farmers will be bolstered by various agricultural support measures that promote the establishment of new cattle farms. Many more are expected to benefit from the improved veterinary service provision and animal health services. These service improvements will also extend to (unregistered) household farmers with typical small holdings of two–five head of cattle. Eventually, many household farmers are expected to move up the value chain and register as individual farmers, a legal status that would allow them to benefit from improved public services, financing programs, and market linkages. As a result, these beneficiary farmers are expected to increase their production and become more viable cattle producers.
How will greenhouse gas emissions related to the growth of the sector be controlled?
The estimated net mitigation potential of the Program is 5.6 million tons CO2 equivalent over five years, despite a 2.5-fold growth in beef output. Three mitigation pathways will be combined to achieve: (i) increased productivity and decreased greenhouse gas emissions per unit of product through improved livestock management practices (feed management and winter feeding, genetics and animal health improvements, offtake and fattening strategies); (ii) increased soil carbon sequestration through improved grazing management practices (adaptive grazing, restoration of degraded lands); and (iii) the adoption of energy-efficient equipment (cooling) and production of renewable energy (solar and wind) to reduce and displace fossil fuel energy consumption. Practice changes on farms will be induced through extension and advisory services (knowledge and best practice dissemination) and the conditionality of public support (use of public resources toward more environmental and climate-oriented outcomes). The Program will also improve the national environmental information system.
Where would the Program funds go? Who will receive the funds?
The nature of the Program instrument is such that the World Bank loan supports a government program, namely, the State Program for Agro-Industrial Complex Development (2017–2021 and 2022–2026). This means that the World Bank loan will go to the treasury account in the Ministry of Finance and will be one source for financing the State Program. The Ministry of Agriculture will receive its budget allocation as part of the regular government budget process. As noted, the Bank-supported Sustainable Livestock Development Program for Results has well-defined, concrete, measurable, and realistic results targets that need to be achieved during the implementation of the Program, and only upon achieving these targets will the corresponding disbursement be made.
How will small and medium farmers receive money?
The Program will support improvements to the state’s agriculture support system in order to expand the number of beneficiaries, especially small and medium individual registered farmers. The Program will also improve the targeting of the support measures, which will have specific and clear requirements for farmers to meet before qualifying for assistance. Over 100,000 farmers will be offered opportunities to learn good agricultural practices, and at least 20,000 new cattle farmers will be offered support packages to start their farming business and sell high-quality beef cattle to feedlots.
The activities of the Program are not clear. What exactly is the US$500 million loan for?
The activities of the Program correspond to selected activities of the State Program for Agro-Industrial Complex Development, 2017–2021 and 2022–2026. These activities are described as Results Areas in the Program Appraisal Document, which can be found here. They are very specific, and all the activities are linked to identified results targets. In fact, the State Program is going to be amended and adjusted in order to include the specific, measurable, and realistic targets of the Sustainable Livestock Development Program for Results. The loan disbursements will go to the single treasury account of the Ministry of Finance and will replenish the general government budget. The Ministry of Agriculture will continue to receive its budget allocations as it has always done. The Ministry of Agriculture will commit adequate budgetary resources to achieve the targets of the Sustainable Livestock Development Program for Results.
How are the loan disbursements linked to the actual costs of the activities?
The loan disbursements are not linked to the actual costs of the activities. The loan disbursements are estimated as a funds-flow to the budget and can vary significantly from the actual costs. As the Program results are transformational for the livestock sector of Kazakhstan, the Program is designed to reward the government for improving the systems, carrying out the reforms, and implementing the activities as planned. The loan disbursements are not intended to cover the costs of activities. For that, there are country systems and procurement procedures that the World Bank has assessed and found adequate. It is estimated that the loan is only a part of the State Program for Agro-Industrial Complex Development, which for the period 2021–2025 is projected to be roughly US$2 billion, including state agriculture support measures (subsidies), veterinary system financing, and support for the agricultural advisory system and other areas of the state’s agro-industry strategy.
How is the Program helping Kazakhstan to address the COVID-19 pandemic and overcome the resulting economic difficulties?
The crisis generated by the COVID-19 pandemic and its impact on commodity prices, including oil, have reinforced the relevance of the strategic orientations outlined by the president. The Government has targeted the agriculture sector as one of the key elements of its economic response package. The COVID-19 pandemic and the resulting economic crisis have substantially damaged Kazakhstan’s revenue base and its growth prospects, now estimated at a 3 percent contraction in 2020. Poverty may increase to 12.7 percent in 2020, and regional disparities may also increase. In this context, agriculture and food security, including the livestock sector, are an important part of the county’s recovery strategy. The Program is supporting Kazakhstan to promote rural jobs and income opportunities and expand non-oil export-oriented sector development. It supports expanded meat production and increased domestic value addition, thus strengthening domestic food production, reducing reliance on imports, and increasing rural incomes.
The World Bank’s Board of Directors approved this loan for Kazakhstan in 2020. Why did the implementation of the Program start only this year?
The process of signing and launching any investment project in Kazakhstan goes through several stages of approval at the national level to satisfy all internal government procedures, including within the Ministry of Finance of the Republic of Kazakhstan. After being officially signed by the Government of the Republic of Kazakhstan, the Loan Agreement is subject to ratification by the country’s Parliament.